Midyear Outlook 2015: Some Assembly Required

We are pleased to introduce our LPL Research Midyear Outlook 2015, with the insights and guidelines to put together portfolio strategies for the rest of 2015.

Few things can dampen the excitement of seeing the delivery of a long-awaited package on the porch than three words—“some assembly required.” Like any complex assembly, whether it’s a 1,000-piece puzzle, a kid’s shiny new bike, or a plan to navigate tricky economic times, the amount of pieces to collect and put together can be daunting. But the assembly can certainly be made easier with a well-formulated plan, the right tools, and the LPL Research Midyear Outlook 2015: Some Assembly Required as the blueprint for success.

The economy has helped deliver six consecutive calendar years of positive returns for stocks since the end of the 2008 – 2009 Great Recession, as measured by the S&P 500 Index; however, constructing a strategy for the remainder of the economic expansion will require a tricky assembly. Divergent monetary policies reveal an uneven global recovery that has triggered an uptick in stock market volatility. A few important pieces requiring assembly for the remainder of 2015 include: „

• How the U.S. economy pieces together the components needed to bounce back from a lackluster start of the year. The U.S. economy hit an unexpected soft patch to start the year due to a severe winter freeze, the West Coast port strikes, ongoing effects of lower oil prices, and the surging U.S. dollar. Returning to a more normalized 3% growth level will be crucial to build further upon the market’s first half gains. „
• After successfully delivering the U.S. economy out of the recessionary “warehouse,” how does the Federal Reserve (Fed) assemble an exit strategy from its six-year policy of zero interest rates? With unprecedented levels of accommodative monetary policy rendering any traditional instruction manual pointless, the Fed will have to use its entire toolbox to construct a delicate increase in interest rates without disrupting the fragile economic growth and the wavering confidence of businesses, consumers, and investors.
• Corporate earnings growth continues to search for that spark to ignite equity advances. In the U.S., lackluster profits aligned with weak first quarter 2015 economic growth to produce the lowest level of year-over-year corporate earnings growth in 11 quarters. Overseas markets are looking for a power boost from the very accommodative monetary policies of global central banks across Europe and Asia, in an attempt to spur sustainable growth, improve earnings, and avoid deflationary forces.

Although many packages are still in transit as we approach the midpoint of 2015, the biggest challenge for the market is putting the necessary pieces together to construct the backdrop for solid global economic growth, stable prices and currencies, and expanding corporate profits. The task is complicated by the Fed’s expected first interest rate increase in nine years later this year.

Download your copy of the LPL Research Midyear Outlook 2015: Some Assembly Required